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The Pound Sterling (GBP) has continued to trade at weaker levels ahead of today’s Bank of England (BoE) policy meeting following the release yesterday of the much weaker than expected UK CPI report for November, MUFG’s FX analyst Lee Hardman reports.

As mentioned earlier, the inflation data later is likely to overshadow major central bank decisions for today. However, it is going to be a messy one as the report is marred by the US government shutdown in October through to November. That has resulted in the BLS skipping the October report and the focus today will be on the November numbers. But as mentioned in the linked post above, it doesn’t mean that we won’t see any October figures whatsoever.

The data collection methodology by the BLS still means that some portion of the CPI basket is taken from sources that don’t entirely
require personal collection. Instead, they rely on online prices and private data providers.

As such, the BLS could still publish some October numbers for reference should they choose to. But ultimately, it seems more discernible for them to stick with a two-month change and let market players fill in the gap themselves. So, we’ll see.

The expectation is that we will see headline annual inflation clock in at 3.1% for November, up just marginally from September at 3.0%. Meanwhile, core annual inflation is estimated to keep steady at 3.0%. When you drill into the second decimal point, perhaps there is a better clue of how the numbers might play out.

MNI estimates highlight that headline annual inflation is actually seen at 3.05%, so it is borderline rounded up to 3.1%. Meanwhile, core annual inflation is estimated at 2.98% so that is more or less 3.0% anyway.

Once again, core goods inflation is expected to increase slightly in reaffirming more impact from tariffs. However, supercore inflation i.e. core services excluding rents, is estimated to moderate further and that will support the narrative that price pressures are still keeping in check at the balance.

Here are what some analysts are saying ahead of the report later:

BofA- Core CPI to average 0.23% m/m across October to November- “Since the BLS won’t be publishing the Oct aggregates, we will be evaluating the two-month change in
inflation. For the two months ending Nov, we forecast headline and core CPI inflation of 0.46% (0.23% m/m
on average).”- “Y/y headline and core CPI inflation should edge down from 3.0% in Sep to 2.9% in Nov.”- “One reason for our somewhat soft forecast is that the CPI will reflect new health insurance information,
which we estimate to be a decent drag on headline and core. Importantly, this will not affect PCE inflation.”

Goldman Sachs- Core CPI to average 0.21% m/m across October to November- As BLS isn’t publishing October numbers, “price changes for a large share of the basket
will need to be viewed on a two-month change or year-over-year basis rather than the usual one-month
change”- “We have penciled in upward pressure from tariffs on goods categories that are particularly
exposed worth +0.08pp on core inflation on average across October and November.”- “We expect downward pressure from delayed data collection on categories that typically experience
steep holiday discounting in late November, worth -0.04pp.”- “Over the next few months, we expect tariffs to continue to boost monthly inflation and forecast monthly
core CPI inflation of around 0.2-0.3%.”

Barclays- Core CPI to average 0.29% m/m across October to November- “On balance, markets will have to rely on 2-month price changes from September to November, and the
annual rate (y/y) for November. The BLS also is not offering any guidance for handling the missing October
data.”- “This report is unlikely to be seen as a “clean” read on inflation, with October data incomplete, and
November based on a smaller pricing sample.”- “We expect the uptick to be led mainly by core goods prices, which we forecast to have sequentially
accelerated over the prior two months, led by a rebound in used cars prices and firmer inflation across the
remaining core goods basket.”- “Market participants are also concerned that this report could
be biased lower, since price collection occurred predominantly in the second-half of November, during
Black Friday promotions. We think this matters more for core goods prices, and particularly for about half of
this basket.”

This article was written by Justin Low at investinglive.com.

The European Central Bank (ECB) is expected to keep rates on hold today, emphasizing that policy is in a ‘good place’ as stronger activity, wage, and inflation data lift euro-zone short-term rates.

Eurozone Construction Output w.d.a (YoY) increased to 0.5% in October from previous -0.3%

Eurozone Construction Output s.a (MoM) increased to 0.9% in October from previous -0.5%